The Palestinian and Israeli leaders met for the second time this month today to discuss the "core issues" that would have to be tackled before a Palestinian state could be inaugurated.

It was the first time that Mahmous Abbas, the Palestinian president, and Ehud Olmert, the Israeli prime minister, discussed issues including Palestinian refugees, the status of Jerusalem and the borders of a future Palestinian state, according to an Israeli spokesman.

"These core issues have to be discussed on the way to finding a diplomatic solution of two states for two peoples," the spokesman quoted Mr Olmert as saying.

However, the chief Palestinian negotiator, Saeb Erekat, said the two leaders did not discuss the issues in detail. He said both sides should seize the initiative and "reach decisions".

The meeting, which followed talks in Jericho earlier this month, came amid tentative hopes of progress in the long-stalled peace process.

The recent wave of diplomacy, with repeated visits to the Middle East by the US secretary of state, Condoleezza Rice, comes ahead of a regional conference on the Israeli-Palestinian conflict to be hosted by the US this autumn.

Going into today's meeting, Mr Abbas said the conference would be a "waste of time" if it failed to address the three core issues.

Israel has argued it has made several gestures to the Palestinians in recent weeks, including releasing Palestinian tax revenues and freeing about 250 Palestinian prisoners, to try and bolster Mr Abbas and ensure that his Fatah party retained control of the West Bank.

Today, Mr Olmert told Mr Abbas that Israeli security officials were drawing up plans to permit greater freedom of movement within the West Bank, which is severely restricted by hundreds of Israeli roadblocks.

The Israeli prime minister made it clear that Israel would halt talks if Mr Abbas brought the more radical Hamas, considered a terrorist group by the US and EU, into his government, according to an Israeli government spokesman.